Lower effective tax rate of 39% instead of 42.74% in top bracket of new tax regime; here's how marginal relief works
«Individuals earning higher income are charged an additional charge above tax which is known as a surcharge. It's worth noting that in Budget 2023, the highest surcharge rate of 37% was reduced to 25% under the new tax regime, effective from 1st April 2023. This move brought down the effective tax rate from 42.74% to 39%,» says Abhishek Soni, co-founder, Tax2Win, a tax filing assistance company.
What are the slabs of surcharge?
The surcharge rates under both old and new tax regimes are structured as follows:
Source: Akhil Chandna, Partner, Grant Thornton Bharat
How is the surcharge calculated and levied?
Soni shares an example of how to calculate a surcharge:
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Example: The taxable income of a salaried individual is Rs 53 lakh. In this case, since the taxable income of the individual is more than Rs 50 lakh but less than Rs 1 crore, he is liable to pay a surcharge at a rate of 10%. The income tax on Rs 53 lakh income is calculated as per the normal slab rate under the new tax regime, which amounts to Rs 12,75,000. The rate of surcharge that is applicable in this case is 10%, hence the amount of surcharge would be 10% of Rs 12,75,000 which is Rs 1,27,500. Thus, income tax payable (inclusive of surcharge would be Rs
